ERHC Energy Inc (ERHE)

[ERHClongtimer]

Unsustainable
                                    
As shown here, ERHC will not be able to obtain $50 million with the current limit of authorized common stock if it continues to make private placements with the same terms as last week's deal.

It would take a lockup of approximately 435,272,770 shares (issued and warrants) to obtain $50 million dollars. Prior to last week's deal, there were 728,300,444 shares outstanding, leaving approximately 271,699,556 authorized unissued common shares remaining. So it is obvious to see that ERHC cannot not get their $50 million if they keep issuing stock at $.22 and with the same ratio of warrants.

So:
A. They only plan on going after a small portion of the $50 million in the near future (after all, the shelf registration is good for two years).
B. They anticipate catalyst(s) that will boost the share price, and therefore make for more favorable placement terms (being able to issue less stock for more money).
C. They plan on making use of preferred shares. (Not likely IMHO)
D. They get shareholders to increase the authorized shares limit.
E. A combination of the above.

I'm thinking it will be a combination of A & B. I am especially interested to see if anything becomes of this: "Other would-be buyer for Shell's assets include the trader and E&P concern Elan Oil, which employs a former executive of Addax Nigeria, Les Blair. Elan has joined forces for its bid with Emeka Offor's ERHC company which is present in the Joint Development Zone between Nigeria and Sao Tome." (Link to full article)

Whatever the case, as a shareholder, I fully expect ERHC to use these deal-with-the-Devil funds to increase shareholder value in a prompt, concrete way, and not have them sit in a bank account somewhere for the next two years. Otherwise, this "dilution for dollars" exercise will be completely senseless. - Longtimer